Norwood Manufacturing, Inc. v. United States

36 Cont. Cas. Fed. 75,917, 21 Cl. Ct. 300, 1990 U.S. Claims LEXIS 328, 1990 WL 115557
CourtUnited States Court of Claims
DecidedAugust 10, 1990
DocketNo. 571-88 C
StatusPublished
Cited by7 cases

This text of 36 Cont. Cas. Fed. 75,917 (Norwood Manufacturing, Inc. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Norwood Manufacturing, Inc. v. United States, 36 Cont. Cas. Fed. 75,917, 21 Cl. Ct. 300, 1990 U.S. Claims LEXIS 328, 1990 WL 115557 (cc 1990).

Opinion

OPINION

RADER, Judge.

In 1987, the United States Postal Service (USPS) awarded Norwood Manufacturing, Inc. (plaintiff or Norwood) a contract to [302]*302produce lightweight nestable pallets. USPS uses pallets to transport bulk mailings. Nestable pallets stack easily one on top of another. Norwood produced wafer-board pallets with plastic legs.

On February 9, 1988, USPS terminated the contract for default. USPS defaulted plaintiff for late deliveries and a breach of warranties. Plaintiff now seeks to convert the termination for default into a termination for convenience of the Government. Plaintiff also claims anticipatory profits for USPS bad faith.

On January 30, 1990, defendant moved for summary judgment. Plaintiff cross-moved for summary judgment. Following oral argument, this court grants defendant’s motion for summary judgment and denies plaintiff’s cross-motion.

FACTS

In August 1986, USPS issued a solicitation for 657,000 lightweight nestable pallets. USPS wanted these pallets to carry bulk mail. The solicitation required the pallets to be 40 X 80 inches, nestable, strappable to each other, and capable of carrying 2,500 pounds of bulk mail. Generally, however, the specifications set forth few minimum requirements and accorded the successful bidder wide discretion in choosing materials and the method of production.

The solicitation also contained an intended use clause:

Intended Use — Pallets covered by this specification are intended for use with forklift and handlift trucks for general materials handling operations in storage and distribution systems.

Contract No. USPS-P-1017C (ESC) (Contract), at § 6.1 reprinted in Defendant’s Appendix, No. 571-88 C, filed Jan. 30, 1990 (Def.App.), at 598. To ensure production consistent with this intended use, USPS required first article testing. Accordingly, USPS approval of sample pallets set production in motion.

Prior to bidding, plaintiff requested that USPS change the required pallet height of 572 inches to a maximum height. USPS granted this modification. Plaintiff therefore submitted a bid for pallets with a deck thickness of less than 1% inches.

After considering both unit costs and freight costs, USPS designated Litco International Inc. (Litco) as the low bidder. Plaintiff requested a re-evaluation of its proposed transportation costs. Accordingly, USPS conducted an informal technical evaluation of plaintiff’s facility. The evaluation report recommended against awarding the contract to plaintiff. Thus, in November 1986, USPS awarded the contract to Litco and rejected plaintiff’s bid.

The Contracting Officer (CO) denied plaintiff’s timely protest. Plaintiff renewed its protest to the Associate General Counsel for the Office of Contracts and Property Law. The Defense Contract Administration Service Management Area (DCASMA) conducted a pre-award survey. After plaintiff furnished an inspection system conforming to specification MIL-I-45208, DCASMA recommended award to plaintiff.

On May 26,1987, USPS awarded plaintiff an f.o.b. origin contract for 657,000 pallets.1 Norwood’s contract (Nó. 104230-87-V-H-321) was virtually identical to Litco’s contract (No. 104230-87-V-H-314). Plaintiff’s contract contained two options, each for an additional 750,000 pallets. USPS exercised both options on July 27, 1987, thereby increasing to 2,157,000 the number of pallets on order from plaintiff.

Plaintiff participated in first article testing on August 20, 1987. The specified tests included: nesting, capacity, flexural strength, strapability, and mechanical handling. The specification required testing with uniformly distributed loads. Plaintiff chose to use stacks of waferboard, of the same dimensions as the pallet, as its test load. This test satisfied the specification, but did not approximate actual use conditions. Bulk mail would rarely, if ever, rest [303]*303uniformly across the entire surface of the pallet. Rather, loading and movement of the mail would shift the burden from one place to another across the pallet surface. The waferboard stacks, on the other hand, tended to reinforce rather than strain the thickness and stiffness of the pallet deck.

Plaintiffs pallets passed these first article tests. Plaintiff thereafter sent the test report to the CO for first article approval. Further, the contract instructed:

The Contracting Officer shall, by written notice to the Contractor within fifteen (15) calendar days after receipt of such test report by the Postal Service, approve, conditionally approve, or disapprove such first article.

Contract, at § H.l, reprinted in Def.App., at 549.

USPS notified Norwood of first article approval by telephone on September 21, 1987. On that same date, USPS issued Modification 03 authorizing Norwood to begin production. Plaintiff signed the modification three days later and returned it to USPS. On October 2, the CO signed Modification 03.

The contract required plaintiff to begin delivering pallets no later than sixty days following first article approval. The contract required plaintiff to complete delivery of the entire first installment of 30,800 pallets within ninety days of first article approval. In correspondence, plaintiff told USPS of possible delays. Def.App., at 102, 106. By December 21, 1987, plaintiff delivered 24,200 pallets. Plaintiff delivered 30,-800 pallets by the end of the year. By February 2, 1988, plaintiff had delivered 48,400 pallets.

Plaintiff sent a sample lot of ten pallets to a USPS facility in Corinth, Mississippi prior to the scheduled delivery date. According to an October 30 USPS report, these sample pallets failed in use. Subsequently, users of the pallets delivered in December complained that the pallets did not perform properly. Specifically, plaintiffs pallets would not work on assembly lines and would snap or break when carrying loads in excess of 1000 pounds.2 Often, the plastic pallet legs broke when hit by a forklift or if strained by uneven loads.

On January 15, 1988, the CO issued a “stop work” order. Four days later, the CO withdrew the “stop work” notice and substituted a cure notice. The cure notice complained of late deliveries and breach of the warranty of supplies. Plaintiff proposed five possible solutions.3 After evaluation, USPS rejected these proposals.

USPS terminated plaintiffs contract for default on February 9, 1988. Plaintiff thereafter filed a claim with the Office of Contracts. After denial, plaintiff filed suit in the United States Claims Court.

Plaintiff alleges that USPS improperly terminated its contract for default. In response to the CO’s delivery delay grounds for default termination, plaintiff asserts that the date of first article approval was October 2, 1987. Accordingly, plaintiff contends that its deliveries were on time. USPS argues, however, that first article approval occurred on September 21, 1987. Measuring delivery deadlines from this earlier date, defendant contends that plaintiff’s deliveries were late.

In response to the CO’s second grounds for default termination, plaintiff argues that it did not breach any warranties. Plaintiff maintains that USPS specified the design of the pallets. Therefore, plaintiff claims that USPS assumed the risk of product failures.

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36 Cont. Cas. Fed. 75,917, 21 Cl. Ct. 300, 1990 U.S. Claims LEXIS 328, 1990 WL 115557, Counsel Stack Legal Research, https://law.counselstack.com/opinion/norwood-manufacturing-inc-v-united-states-cc-1990.